Financial Services

All financial services businesses in Australia are required to operate under an Australian Financial Services Licence (AFSL). In this article, we will examine the essential elements of Australian Financial Services Licences to help you better understand your position as a prospective financial services provider or consumer.

A. What are Australian Financial Services Licences? What is the relevant law?

The Corporations Act 2001 (Cth) is the statute that governs AFSLs. The Act defines an AFSL as a ‘licence under section 913B that authorises a person who carries on a financial services business to provide financial services.’  Section 913B sets out the details concerning when these licences can and cannot be granted. An application for an AFSL must be granted where:

– The application conforms with the law;

– The applicant is a natural person, a corporate entity, a partnership or a trustee;

– The applicant is viewed by Australian Securities and Investments Commission (ASIC) to be a person, persons or an entity that would not likely contravene the requisite obligations under the law;

– There is no reason for ASIC to suspect that the applicant or the applicant’s responsible officers is/are not of good fame or character;

– The applicant provides ASIC with all information requested; and

– The applicant conforms to all other regulation requirements.

The Act also clarifies factors relevant in determining whether ASIC will deem you a person of ‘good fame or character’. For example, if you have been convicted of an offence that involves dishonest behaviour punishable by multiple-month incarceration in the last 10 years you will likely fail this test. Other considerations include, but are not limited to, whether you have had a AFSL cancelled or suspended in the past, or whether you have been the subject of a banning or disqualification order under the Act.

B. Does the law apply to me?

Whether the law applies to you depends on whether you are a financial services provider. You will be considered a financial services provider if you are a person who provides financial product advice, deals in financial products, generates a financial product market, operates a registered scheme, provides a custodial or depository service, or provides traditional trustee company services.

If you are deemed a financial services provider and are granted an AFSL, you will be bound by certain legal obligations. For more information on the obligations of licensees, please see our article on Obligations of Financial Service Providers. The requisite obligations, as well as the time and money expenses associated with AFSLs should be considered carefully before embarking on the application process.

C. What are the processes involved in acquiring Australian Financial Services Licences?

As outlined above, an AFSL is granted by ASIC via an application process. The application itself requires that you or your agent provide comprehensive information as to: the applicant’s details, details of the main contact person, the specific services or products the applicant wishes to be authorised for, and whether these services or dealing activities will be provided outside Australia. You will also need to provide proof documents to support your application.

Applications can be made through ASIC’s electronic licensing service or via post. This can be an intricate process and it is recommended that you seek legal advice in making an AFSL application. A solicitor can also provide you with more detailed information on the fees associated with your particular venture. Please note that the granting of an AFSL should not be considered a reference point regarding the competency of the licensee’s abilities, it simply illustrates that the licensee has satisfied the requirements of section 913B. It is always important to research a business thoroughly in order to clarify the quality of their services.

An understanding of the law is imperative to the Australia Financial Services Licences application process. This will help you evade the expenditure of unnecessary costs and ultimately preserve your interests.

To find out more about financial services law check out our Resources Centre. If any of the issues in this article are relevant to you please get in touch today.

This article was authorised by Warwick Heeson.

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